Saturday, January 05, 2008

Let Judges Decide

En bloc sales were the buzzwords of 2007 and if the economic indicators are right, the story will continue to dominate the headlines this year.

The en bloc craze of the past year has meant a lot more work for the Strata Titles Boards (STB). Since 1999, the board has shouldered the additional role of approving collective sales of developments that cannot get a 100-per-cent consensus from the sellers of the land but where 80 to 90 per cent of the sellers support the sale, depending on the age of the development.

Last year, Parliament passed changes to the law that require the 80 or 90 per cent consent level — depending on the age of the development — to also take into account the unit sizes of the Strata Title owners.

Lawyer Lee Liat Yeang of Rodyk and Davidson said in December 2005: "One important legal condition to be satisfied before the STB can grant an order for sale is that there is no objection filed by an owner on 'financial loss' ground.

"Another important legal ingredient … is that of good faith. In the Act, the good faith element has to be determined by having regard only to the following factors: Sale price, the method of distribution of the sale proceeds and the relationship, if any, of the purchaser to any of the owners."

Not surprisingly, the increased volume of work undertaken by the STB has brought in its wake its fair share of controversy and criticism.

In a case last year, High Court Judge Andrew Ang described a collective sale approved by the STB as "a real mess".

He then ordered a stay on the collective sale.

To be fair to the STB, such a stay order is rare. Also, the board rarely rejects an application for a collective sale. Nevertheless, the STB did withhold its approval in at least two en bloc cases involving Finland [Gardens] and Horizon Towers last year. The high-profile Horizon Towers case saw some of the best legal minds in the country slog it out as minority owners tried to block the sale and initially secured the STB's support.

The High Court eventually sent the sale back to the STB for reconsideration. After reconsideration, the STB approved the sale — although the minority owners are now appealing against the decision.

These en bloc cases have prompted many to look at the STB to see how its work can be made better or easier.

At a seminar last August, lawyer Ong Ying Ping raised this question: "Would it be better to revert to the original position before the 1999 changes? Is the present regime manifestly superior to the pre-1999 position where 100-per-cent consensus is required?"

Going back to the pre-1999 position would serve little purpose, since the changes were a pragmatic policy response to the promotion of urban redevelopment in Singapore.

Thus, it is more important to see how the work of the STB can be made better. Such impetus for improvement appears to have become more necessary in the light of recent legislative changes that gave the STB more discretion and powers.

The STB can now do three key things. It can:

• Increase the sale proceeds of minority owners who have filed valid objections to an en bloc sale application.

•Approve an en bloc sale application and disregard any technical irregularities that are non-compliant with the collective sales requirements if such non-compliance does not prejudice any owner's interest.

• Issue guidelines on the permissible expenditures that will count towards the evaluation of financial loss claims.

In effect, these new powers have enhanced the legal role that the STB plays — wider than the technical or mediatory role envisaged of the STB when it was first set up. That is why the board has had panel members with a wide range of experience, and only its president and deputy presidents are required to be legally qualified persons.

In addition, the discretion of the STB now appears to be more subjective and a body of precedents will be needed to control the application of these powers.

Indeed, one criticism of the STB, when it first rejected the Horizon Towers' collective sale application, was that it had not justified its decision with a detailed basis.

There thus appears to be a need to increase the legal expertise found on the STB.

When the Ministry of Law consulted the public on the changes it made last year, respondents had expressed a desire to see a "fairer and more transparent" process.

Lawyer Ong Ying Ping also noted: "Unlike policies that are both initiated and driven by government agencies, the en bloc legislation was largely a public-private initiative. The members sitting in the STB are all volunteers."

In February last year, the blogger of Enblocing Singapore wrote: "Given that nowadays, most objections are not really about financial loss … but about losing their homes …. there is a surprising dearth of the very people who should be involved in hearing these minority owners' plight."

Perhaps, for a better balancing of such interests, the time has come for the Ministry of Law to allow the STB to be operated by a team of full-time professionals rather than volunteers.

A newspaper reader suggested that a sitting judge should head the STB. Arguably, to take the idea forward, why not hand over the whole operation of the STB to the judiciary?

In his Second Reading Speech on the Land Titles (Strata) (Amendment) Bill in September, Deputy Prime Minister Professor S Jayakumar emphasised that en bloc sale legislation required the maintenance of a careful balance.

They should "provide additional safeguards and ensure greater transparency for all owners" but should not make it "unduly onerous to bring about an en bloc sale".

Who better than a group of impartial persons to manage this delicate balance other than the judiciary?

There is clearly a need to take a comprehensive look at the structure of the STB in light of its enhanced legal role, and to enable this enhanced legal role to be exercised by persons qualified to do so.

Follow Happy

Always Happy

I Am

This blog is personal.
Nothing in this blog is meant to substitute professional legal, financial or other advice. Please seek such advice independently! Dharmendra Yadav is presently a corporate counsel in a financial institution. Contact him by e-mail dpyadav {[at]} yahoo.com